PUT Options Explained | Stock Market Investing

[Music] guys remember we sell puts selling puts means that the company is currently selling for currently at 50 a share let's just say paychecks eighty seven dollars a share i wanna buy it at 55. what i'm gonna do is i'm gonna sell a put option which gives somebody the right to put the shares in my hands if by the strike date the date we pick it falls below this number so what right now what what do you have right now what's the june whatever oh you want prices yeah is there a better word for put that we can all understand what the hell this is well it's called a point i know what it's called but is there a better word that you can like think about like how can i put it in my hands how is that not easy um because somebody's paying you well in general i think is you don't own it yet or i do own it and somebody's gonna put it in your hands okay so you don't own the stock quite yet you're not on the stock yet you're selling somebody the right to put the shares in your hand that's why it's called a put and you're doing this because you want this company i want this company 55 what's the premium on this one so we're gonna go 60 55 doesn't have anything okay for what date uh june 18th 148 days from now 60 cents okay so somebody's gonna pay me 60 cents or basically one percent of the value so that five months from now they can force me to buy the shares if it falls both 60. so let's say it drops to 55. i still have to pay them 60 for the shares i keep the 60 cents and i get it for 55 bucks so for example let me go back here so for example say the stock starts going down from 87 and maybe hit 70. then something terrible happens over the weekend the market opens and this stock opens five dollars less than your strike pipe strike price you're now losing your money and you have to buy this on the date right here yes on that date right here essentially that you're forced to buy it at 60 even when it went blowing below okay but the theory behind this the reason i'm okay with it is i was buying at 60 anyhow so when i buy at 60 anyhow it was gonna end up at 55 i lost five dollars anyhow at least here i got 60 cents along the way to wait ah this is all right this is really spicy paul the comments are flying in this is wonderful listen to this one owen says paul is selling the idea to get someone to make him buy the stock at 60. that's an interesting concept yeah so i'm i'm sitting there saying listen do you want me to buy the stock at 60 from you for you from you essentially from the market if the answer is yes great pay me 60 cents and i'll do it i see so this is the wager you're making trader mo so let me give an example of what we're essentially doing is being paid to wait now phoenix one of our patrons he's doing something right now with haynesbrand hbi it's 15. 15.64 cents a share he has he sold puts today expiring tomorrow at 15 and 50 cents so his goal is to be if he gets assigned those shares at 15.50 or lower yes he's still being paid to buy those shares effectively ah so he's making money what are they paying him what's the premium um let me find it for you so guys the company's currently at 1564. because this thing expires tomorrow it's gonna be it's gonna it's he's picking a very low strike a very close to the current money price 15.50 for one day for one day of waiting he's being paid 15.50 10 cents 10 cents times 100 shares don't worry about that it's per share right now okay ten cents per share so somebody's paying him ten cents for one day of waiting if this thing ends up at 15.50 or below he'll be forced to buy it but here's the good news he keeps the 10 cents either way anyway if it ends up if it's closes here he keeps it 10 cents nothing happens and right now there's a 40 chance that that's gonna happen right now it's a 40 chance that that what that it's gonna be the deltas at 1550 is 40. so the chance right now the market's saying it's 40 chance it falls below this by the by the end of tomorrow correct he's gonna wait one day and get 10 cents now me i had to go a month out or more because i want to bet on much lower prices but if you want to own the shares like phoenix clearly does you write this very close because you're just gonna collect premium and it's free money if you're gonna buy it anyhow just take the money tony tony really says it says it best here i sell put options every week it's a great way to make an income while we wait to buy a stock we want at a discount exactly yeah i think i've said the same thing and phoenix is doing this every week he's building a position so next week he's going to go out to next friday guys it has become a very very lucrative thing for me to do when everybody asks me for my portfolio and look at my returns this is going to blow everything out of the water i would say the same thing well you own maybe 30 stocks but the list of puts you're doing no i own like 12 stocks i have like 50 positions of puts yeah it's all low it's like four pages when i own when all my money is invested in 30 stocks i'm going to own hundreds of options gonna sell call options put options i will outperform the mark if i just match the market in my stocks my puts and calls will far oxy exceed the market but what's the catch yeah one contract yes well there's a couple catches one contract equals 100 shares i think people are getting that in the comments good so a company like autozone which you did to the video of autozone azo each share is 12.50 so each contract is 125 000 worth that's a lot for normal people that's the problem that's now on hbi it's 15 a share so a contract's fifteen hundred fifty dollars so it's 1500 bucks much easier but i'm working a much larger share amount so i can sell a lot more and do a lot more because of that it's an example of so i think you wanted to i'm sorry i didn't mean to go just guys i'm gonna that's why i'm apprehensive to show my pollings because you guys would look at my stocks and say oh cool all i have to do i know i'm gonna beat the market in my stocks over long periods of time maybe not year to year but the puts and calls are gonna put me way over the edge like i truly believe i'm going to make 15 to 20 returns a year over over over 10-year periods of time yeah after the numbers we did this week that's good that's like the income is i just did this month i'm not going to say the number i made this month but it was insane how much i made i mean last year when you were throwing you were on this podcast and you make hundreds of thousands of extra dollars a year moving these this stuff around well more than that it's a lot more than that it's multiple seven figures so i bought more biogen today we did a biogen video guys a couple days ago we love bio gym currently you have it priced almost half i'm sorry you have it priced almost double what its current market cap is but i have a 40 shares of biogen you ask me why don't we do options i have 40 shares i'm like oh yeah yeah so i need more but regardless this is interesting and we should certainly do more of this because the the the the comments are flying in people are very interested in this and this is really i think this is really upper level investing paul i mean just the idea most people are pretty lost in general on how to invest so yeah in our friend of ours named gary when i first told him that i want to do this back in may he said go for 15 you can get 15 annualized returns we don't necessarily always do that we're just trying to get we're trying to we're not we're trying to get enough income where it adds good return to our money without we don't want to get the shares all the time placed to us or what's called a covered call which is you own the shares let's say you own the other option to do is let's say you own 100 shares of hbi you sell one contract at let's say it's that um i think 16 in a month and somebody actually mo just give me the example what what is the february 19th uh 17 hbi well we were looking at paychecks do you want to continue that because we went from 84 to 60. i mean did we do are you done with that or did i did i cut you off no you're probably but let's do the one that's phoenix because slaughter smaller numbers okay february 19th yep for what price 17 covered call yeah just yeah covered call say 30 cents okay so guys right now phoenix has hbi 100 shares at 15 and 64 cents you can sell somebody the right this is called the covered call you own the shares of hbi i have them in my account 100 shares of this you have them that's why it's covered there's the bank doesn't consider this risky you're selling somebody the right at 17 on february 19th to force you to give them the shares at 17 and they're gonna pay you 30 cents so what that means is if the shares if the stock ends up above 17 bucks you got to give it to them for 17. so if it goes to 19 you lost out on two bucks but you kept your 30 cents so you really lost 1.70 but if it stays below 17 let's say it ends up at 16.99 you keep the shares and you keep your 30 cents it's a way of generating income what's the delta on that 27 so what that says is the delta's 0.27 they're sitting there saying it's a 27 chance that between now and february 19th that hbi ends up above 17 that's another way i'm generating income i'm selling puts and i'm selling covered calls on stocks i already own i do not buy puts i do not buy calls i very rarely do that i'm sitting here trying to say give me the money for me to wait and give me the money to give you my shares that that might hit a certain [Music] price you

Channel: Everything Money

Views: 28,760

Keywords: everything money, investing, investing101, stock trading for beginners, investing in your 20s, financial education, puts, put options, options trading, trading puts, trading options, options, calls, calls and puts, put options explained, buying put options, call and put options, selling put options, how to trade options, put options trading for beginners, put option, options trading strategies, call and put options explained, put option example, how put options work

Id: XGQVFzesqWA

Length: 9min 31sec (571 seconds)

Published: Fri Jan 29 2021